Inclusionary Zoning Is Good For Philadelphia

Housing Memorandum No. 2 Intro to Housing Professor Braconi Columbia University Bernard Asagai ba2209@columbia.edu 11/26/2007

Memorandum To:

Mayor John F. Street

From:

Bernard Asagai

Date:

November 26th, 2007

Re:

Inclusionary Zoning: Is It Good for The City of Philadelphia?

Firstly, anything inclusionary is bound to bring about local opposition groups from within the City that will be hesitant to support such proposals, but policies that embrace such ideas have the potential of being extremely lucrative for he city and could provide for new levels of city-wide employment for the majority of the voting public.

Inclusionary Zoning, also termed inclusionary housing has the potential of being an effective political and economic tool for the City of Philadelphia. Given that the city has some the nations oldest housing infrastructure when compared to others cities of its size in landmass, resident population, and demographic categories, the city could be a prime candidate for inclusionary zoning/inclusionary housing measures. If enacted in a balanced manner, inclusionary zoning measures have the potential of revitalizing the cities political and economic engine, can act as a provider of new well paying jobs for the city’s workforce, as well as provide increased land value and increased tax revenues without displacing a single Philadelphian!

The City of Philadelphia currently has very critical housing infrastructure needs.

According to the U.S. Census Bureau, the housing stock is in dire need of replenishment.

Philadelphia contains some of the nations oldest housing infrastructure when compared to cities of similar demographics. The city has 660,389 housing units of which more than

half were built prior to 1940.1 Furthermore, of the 660,389 units, 106,341 are documented as vacant. This portion of housing not only represents unused and blighted housing, but also non-generated tax revenue for the city. When calculated, this vacant housing accounts for not only roughly 16.1% of the city’s total housing stock, but also an enormous loss in revenue which could provide higher levels of city services.

HOUSING OCCUPANCY Total housing units

660,389

+/-482

Occupied housing units

554,048

+/-5,322

Vacant housing units

106,341

+/-5,355

2

2006 United States Census Bureau Data

If the tool of inclusive zoning were focused to not only improve these areas, but also act as the impetus for a new wave of city improvements, the economic benefits to the city of Philadelphia could be staggering.

For example, if the City were to make a policy of fast-tracking the process of all new housing developments where developers agreed to produce additional on and off-site inclusionary housing units that were predetermined by the city, the city in return could assign dedicated human capital resources within the city government whose sole responsibility would be to assist the developer in completing his or her projects in the quickest time possible. In terms of using inclusionary zoning as a method of rehabilitating and revitalizing much of the city’s blighted areas and vacant properties, the city planning board could use it’s resources to construct pre-designed, pre-planning board approved, and ready-to-go inclusionary housing kits which would be specifically and exclusively dedicated for the use of developers who agree to implement inclusionary housing projects within inclusionary zones that the city desires to see implemented. Such a benefit could not only assist in the provision of addition housing and tax revenue increases, but could also assist in the creation of new high-paying jobs which are 1 2

United States Census Bureau: 2006 American Community Survey

desperately needed within the City of Philadelphia. As new low-cost and affordable housing alternatives are needed state-wide within Pennsylvania, the City of Philadelphia could lead the way for not only he city, but the entire state using the component of inclusionary housing.

Selling Points for Potential Developers and City and State Policymakers Philadelphia is a regional transit hub. The city has it’s own international airport with 7 terminals, 4 runways, and handles 700 flights per day3. The cities transit infrastructure also has regional rail and interstate High-Speed rail via Amtrak. Its High-Speed lines provide direct access to other regional centers such as New York City, Boston, and Washington D.C. The city is also a major hub for buss as well. With well-designed inclusionary zoning projects specifically devised to capture the untapped value and unrecognized potential of such resources, the city and state governments could substantially increase their tax revenues. If pre-designed, pre-planning board approved, and ready-to-go Inclusionary Housing Kits were designed around such areas and were supplemented with city and state tax abatement clauses, the bottom-line in terms of costs savings and the potential for profit generation might create an attraction that developers might find extraordinary appealing. The potential for developers to have their initial projects fast-tracked, as well as generate additional revenue by the agreeing to construct a project that has already been approved and certified through a city inclusionary program could prove to be enormously successful. Furthermore, a city initiative of such caliber might find tremendous support within the state capital in that the program would specifically capture unused state value and convert it into tax generating revenue. Though the mount laurel decision took place in the State of New Jersey, it set a land-use precedent in terms of local municipalities responsibilities to insure that housing is affordable for low and middle-class earning residents. Inclusionary projects as listed above certainly follow such logic as defined by the Mount Laurel decision and might enjoy the financial and logistical support of the Pennsylvania State government.

3

Philadelphia International Airport

Another attraction in terms of selling developers on the viability of developing within vacant and blighted areas through inclusive zoning initiatives, is that they will be able to work in areas where nothing currently exist. The potential of working with the city to create new exciting and vibrant neighborhoods could be very appealing to developers and possible residents as well, especially if the state were to get involved through the creation of innovative funding strategies which could provide financial support to the city which could be used to enhance the attractiveness of the area to developers which the city desires to sign on to such inclusive initiatives.

Beyond off-site inclusionary initiatives, the city could create mandatory on-site inclusionary zoning measures which not only guarantee that a specified percentage of inclusionary housing be created within a proposed project, but also guaranteed that inclusionary housing be constructed for low and moderate income residents would in no way have any esthetic, structural, or amenity differences. Such housing should be dispersed throughout various locations of the proposed development and should be indistinguishable from the market-rate housing within the development. Recognizing that the creation of such on-site units could easily become economically unattractive, the city government should work with the planning board to pave the way in providing height bonuses and tax incentives for developers who agree to construct their developments using the city’s inclusionary measures. The tool of tax reduction or even specified tax abatement components could be used as a “carrot-on-a-stick� to assist in reducing project costs and provide the seeds to which developers would begin to see such measures as inclusionary on-site housing as being more economically in their best interest to agree to agree to. Should developers find it difficult to comply with on-site inclusionary zoning, an In-lieu fund option should be available but the use of this option should carry delayed project approvals and very severe penalties!

When Inclusionary Zoning Has Rental Units Finally, it should be understood that the creation of such inclusionary housing should not be used as a method of replacing current municipal rent control regulations. Inclusive housing programs normally carry a 20year lifecycle. After the lapse of the predefined

clausal time-period, the owner of the complex is at liberty to increase the price of the inclusive units to market-rate pricing. This in turn could see the exclusion of the very residents that the program was created to include when the program began. Such a situation would be a benefit to the developer/owner but could not only land the resident in the cold, but could as well become a new tax burden for the city and the state. One way of eliminating such possibilities is to extend or even eliminate the time clause for these units. The developer certainly will have made his or her profit within the dedicated time period and at a great the expense from incentives granted from the city and possibly the state government; however the possibility that a citizen could face the cold in this circumstance is certainly appalling. Given these inherent inefficiencies, the city should insure that existing rent control measures not be eliminated under the guise that the city has created affordability. Normally rent control benefits can be passed-on to specific existing family members that also reside within rental units. These rent control benefits normally do not carry time limitations whereas inclusionary housing measures typically do.

In terms of providing a response to the question is inclusionary zoning a policy that should be adopted for the city of Philadelphia, my response is YES. The approach must be balanced as to attract developers and balanced with specific and detailed policy measures which will guarantee that existing tenured city homeowners will retain highlevels of value and equity within their homes, and that the new measures will not threatened disadvantaged residents with the possibility of future displacement.